Correlation Between Inter Parfums and Western Digital

Can any of the company-specific risk be diversified away by investing in both Inter Parfums and Western Digital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Inter Parfums and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inter Parfums and Western Digital, you can compare the effects of market volatilities on Inter Parfums and Western Digital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Inter Parfums with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inter Parfums and Western Digital.

Diversification Opportunities for Inter Parfums and Western Digital

0.25

Correlation Coefficient

Inter Parfums  Western Digital

Modest diversification

The 3 months correlation between Inter and Western is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Inter Parfums and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Inter Parfums is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Inter Parfums are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Inter Parfums i.e., Inter Parfums and Western Digital go up and down completely randomly.

Pair Corralation between Inter Parfums and Western Digital

Given the investment horizon of 90 days Inter Parfums is expected to generate 0.69 times more return on investment than Western Digital. However, Inter Parfums is 1.46 times less risky than Western Digital. It trades about 0.07 of its potential returns per unit of risk. Western Digital is currently generating about -0.01 per unit of risk. If you would invest  12,233  in Inter Parfums on October 6, 2024 and sell it today you would earn a total of  773.00  from holding Inter Parfums or generate 6.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Inter Parfums  vs.  Western Digital

Inter Parfums

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Inter Parfums may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Inter Parfums and Western Digital

The main advantage of trading using opposite Inter Parfums and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inter Parfums position performs unexpectedly, Western Digital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Digital will offset losses from the drop in Western Digital's long position.

The idea behind Inter Parfums and Western Digital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .